Farms without subsidies
Analysts and farmers say Pakistan has gone a step further; running its farming sector on principles of free-market economy, thus putting the sector in double jeopardy. Experts argue that agriculture cannot be exposed to free trade because it is vulnerable to vagaries of weather that produce gluts (price crashes) and shortages (price rise). In both cases, farmers or people suffer badly. But, unfortunately, the policy-makers are mishandling agriculture and its trade. Their wrong policies have drained life out of farming sector, stripped it of any protection, with industrialists and traders bleeding it white.
The farming sector has lost subsidies and has been taxed instead. Even when selective and partial subsidies were granted, they were routed through the same cartels of manufacturers or traders, which never allowed the money to reach the farmers.
The name of farmers was used to oblige other organised (cartelised) segments of agriculture trade. Had the government been sincere in granting subsidies, it could have studied the mechanism in other countries and found ways to ensure that the money reaches the intended target.
A deeper look into the pattern of meagre subsidies exposes the whole experiment. A subsidy of Rs12 billion on the DAP in 2006 was announced after almost eight years of stubborn insistence of running the sector without it. Instead of finding ways to put the money directly in the pockets of farmers, it was given to importers and manufacturers of fertiliser, who were expected to honestly pass it on to farmers. It was done, and is still being done, despite farmers’ protest that they did not get even 50 per cent of the total allocation.
With all the benefits of hind sight, one can claim that farmers were right. The money got lost somewhere between government officials and the manufacturers and importers. The price of DAP never came down, rather it kept rising, giving excuse for increase in the allocation, which was already going down the drain. The so-called subsidy was increased to Rs30 billion in the next two years but the mode of distribution remained the same, benefiting manufactures and importers.
The doing away with subsidies has not brought efficiency to the sector. Instead, it is faced with huge food deficit. The food crisis made some policy makers realise that it would not be able to run the farming sector smoothly without some kind of subsidies. But, they have still not been able to put up a system of delivering money to the farmers.
There are numerous examples in the world, which can be studied to evolve such system. The Indian government is running a massive subsidy regime of Rs1.19 trillion and ensuring, with a considerable success, that it reaches the targeted segment.
The amount of Indian subsidy is staggering. During 2006-07, it allocated Rs362 billion (Pakistan rupee) subsidy on fertiliser, Rs256 billion on irrigation and Rs165 billion on power. In addition, it also granted Rs72 billion to what it called marginalised (small) farmers through different ways, including writing off their loans.
To ensure better price, the government sets procurement price high – sugarcane at Rs80 per maund and wheat Rs680 per maund – and then subsidises urban consumers. Last year, it also allocated another Rs340 billion for urban consumers to protect them from high food prices.
Pakistan must learn from Indian experiences how it is managing efficiently a huge subsidy regime of Rs1.1 trillion. Pakistan has so far not been able to manage even Rs30 billion without massive bungling.
Similarly, Pakistan also needs to realise that no country in the world with any mentionable agriculture base has experimented with free trade as crudely as it has been doing. Why should Pakistan be an exception?
The so-called free trade has only cartelised its economy and agriculture trade, with a huge social and political cost. These cartels are in the process of assuming a life of their own as is evident from wheat and flour crises. The government maintains that over 800,000 tons of wheat was still lying with hoarders and stockists. But it is forced to import 2.5 million tons at a cost of billions of rupees subsidy. As if it was not enough, a large quantity of wheat was being smuggled out of the country, a product of the so-called free market experiment, landing the country into big food crisis.
A backward agriculture makes the situation even worse. Pakistan is at the bottom of the list of countries as far as farm mechanisation is concerned. Its technology and marketing system are primitive, and water supplies are depleting by the day. Modern technology is almost non-existent. The farmers are hardworking but illiterate in modern ways of sowing, harvesting and post-harvest mechanism.
Pakistan loses 30 to 40 per cent of its perishables at the post-harvest stage.
It has four seasons to produce agricultural commodities, but does not have the requisite technology and machinery to exploit the advantage. It has huge set-up of tube-wells but does not have energy (diesel and electricity) to run them.
In these circumstances, exposing farmers to international competition is suicidal, to say the least.